Pension Funding Reform in B.C. and Manitoba
The legislators in Western Canada have been busy this fall, requiring me to write one last blog before the end of 2019.
Manitoba Pension Reform
On November 27, 2019, the government of Manitoba tabled Bill 8 – The Pension Benefits Amendment Act which impacts both member benefits and the funding rules. The law is expected to pass in the New Year and be effective sometime later in 2020. This is the beginning of the end of the consultations that started back in January 2018.
In a nutshell, the amendments would:
- allow individuals to fully unlock funds in Manitoba locked-in accounts if they have attained age 65 (they are already permitted to unlock 50% at age 55)
- in the event of a marriage breakdown, allow parties to split pension assets up to 50% based on their individual circumstances, rather than choose between the currently mandated 50-50 split or no division
- allow pension plans to permit members to cease accruing benefits and stop contributing once they attain normal retirement age (typically age 65)
- introduce the concept of a ‘solvency reserve account’ to receive employer contributions toward solvency deficiencies; from which refunds of surplus to employers can be more easily paid in the case of an ongoing or wound-up pension plan
While not addressed in Bill 8, the government’s press release goes on to say that employers’ obligation to fund solvency liabilities will be reduced from 100% to 85%, while at the same time strengthening the going-concern funding requirements (like we’ve seen in other provinces). Presumably more details will be forthcoming when the regulations are amended in 2020.
British Columbia Pension Funding Reform
While Manitoba has taken over two years to reform their pension laws, for some reason B.C. has been in much more of a rush to change their rules. You may recall my blog from a few months ago where I complained about B.C.’s hasty consultation process and their creative/original/weird way to determine the Provision for Adverse Deviations (“PfAD”).
Well, on December 12th the B.C. government amended their pension regulations which will be effective on December 31, 2019. It also appears that they did not make any changes to their proposals after receiving critical feedback from significant stakeholders such at the Canadian Institute of Actuaries and the Association of Canadian Pension Management and I’m sure a number of others).
As discussed in my earlier blog, at a high-level the proposals are very similar to other jurisdictions (i.e. reduce solvency funding to 85% of liabilities and enhance the going-concern basis to include a PfAD); however, there are significant differences in the details that do not appear to have a sound rationale (such as simply setting the PfAD to be equal to 5 times a bond yield).
For defined benefit pension plans registered in B.C., the new funding rules will apply once an actuarial valuation is prepared as at December 31, 2019 or later. Therefore, plans will continue to be subject to the old funding rules until their next actuarial valuation.
On a somewhat related note, don’t forget to update your address books as effective November 1, 2019, the B.C. Financial Institutions Commission (FICOM) was replaced by the BC Financial Services Authority (BCFSA). The BCFSA is a new Crown corporation that will be a self-funded pension regulator and will work at arm’s length from the B.C. Ministry of Finance, with greater independence than FICOM enjoyed. Time will tell if this will make a difference that will be noticed by pension plan stakeholders. If the change in Ontario is any indication, pension plans registered in B.C. should be prepared to shell out more in assessment fees to pay for their regulator.
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Happy holidays and best wishes for 2020 to all our loyal readers!